Away-from-home food service business remained weak, contributing to softness in the unbranded/private label segment.
Flowers Foods faced pressure on end markets due to a challenging economic environment and shifting consumer trends impacting recent results.
Gross margin management included bakery closures and portfolio optimization to higher margin businesses, partially offsetting volume declines.
Promotional activity increased, especially around differentiated products, contributing to some positive performance in segments like Dave's Killer Bread (DKB).
Simple Mills continued to grow distribution points and performed well despite a cyber attack at UNFI affecting the second quarter.
Traditional loaf bread sales were pressured by new lower-priced entrants and a bifurcated market with strong performance at both premium and value ends.
Macy's Bold New Chapter Strategy Yields Strong Q2 Results
Macy's reported its strongest comparable sales in 12 quarters, driven by enterprise-wide improvements and strategic execution.
The company's GoForward business, including reimagined stores and digital, achieved 2.2% comparable sales growth, indicating successful transformation efforts.
Bloomingdale's and Bluemercury continued their positive momentum with 5.7% and 1.2% comparable sales growth respectively, highlighting luxury segment strength.
Management emphasized that the multi-brand, multi-category, and multi-channel model provides sourcing flexibility, economies of scale, and product diversification, supporting growth.
The results reflect the effectiveness of the Bold New Chapter strategy in improving product offerings and omnichannel customer experiences.
Coffee costs in Q1 were higher than anticipated, with additional costs expected in Q2 due to hedging and green coffee receipt timing.
Coffee segment pricing benefit updated to mid-20% for fiscal 2026, up from prior 20% estimate.
Coffee volume expected to decline low to mid-teens percentage due to tariff impacts and price elasticity.
First quarter EPS was the softest quarter; second quarter decline now expected greater than first quarter, with a more muted third quarter.
Free cash flow outlook increased from $875 million to $975 million, driven by benefits from the Inflation Reduction Act.
Hostess SKU rationalization did not impact first quarter volume but expected to improve profitability over time.
Overall profit outlook remains intact despite tariff headwinds, with coffee segment profit expected to align with original guidance after absorbing tariffs.
SKU rationalization in Sweet Baked Snacks expected to yield $30 million savings, with $10 million in Q4 and $20 million in fiscal 2027.
Impact of Commodity Cost Increases on Nut Prices and Inventory
The company experienced a 3.4% increase in the weighted average cost per pound of raw nuts and dried fruit, primarily due to higher commodity acquisition costs for all major tree nuts.
Inventory on hand increased by 29.5% to $58 million, as the company stockpiled raw materials in anticipation of seasonal demand and rising costs.
Despite higher costs, the company managed to offset some impact through manufacturing efficiencies and strategic sourcing, maintaining gross profit margins at 18.1%.
Management highlighted ongoing efforts to mitigate commodity price pressures through innovation, cost savings, and retail partner collaborations.
Cash and short-term investments ended at $33.5 million, down from $63.2 million a year ago, with no debt and $70.1 million available on the revolving credit facility.
Comparable store sales declined 7.1%, while direct sales fell 14.4%, with sequential monthly improvement from May (-10.4%) to July (-7%).
EBITDA fell to $4.6 million from $6.5 million last year, impacted by lower sales but partially offset by expense reductions.
Gross margin rate decreased 300 basis points to 45.2%, mainly due to a 240 basis point increase in occupancy costs and higher markdown rates.
Inventory was $78.9 million, flat year-over-year, with clearance penetration steady at 10.2%. Inventory down 28.5% compared to 2019.
Merchandise margins declined by 60 basis points, partially offset by a favorable shift from national to private brands.
Net sales for Q2 2025 were $115.5 million, down from $124.8 million in Q2 2024, driven by a 9.2% decline in comparable sales.
SG&A expenses decreased by $6.1 million year-over-year, reducing SG&A as a percentage of sales to 41.2%.
Dafinchi
